How much life insurance should you have? That depends on many factors, including your age. When you're young, you typically have less need for life insurance, but as you take on more responsibility and your family grows, that changes. Then, as your responsibilities begin to diminish later in life, your need for life insurance may decrease.
To get the most out of your policy, it’s important to periodically re-examine your life insurance needs at different stages in your life. The policy you purchased when your kids were born may not be the right one during retirement. We take a look at different life stages and examine how they can shape your need for coverage.
Life Insurance in Your 20s
When evaluating life insurance needs at different stages in your life, you should really start in your 20s. One of the biggest misconceptions about life insurance is that you don’t need it when you’re young. But that’s far from true.
You may want a life insurance policy if you’re married, have started a family, support family members or have private debt (from student loans, car loans, mortgages, etc.). A life insurance policy can help shield your co-signers or joint account holders against your debts should the worst happen. Consider purchasing enough life insurance to cover these debts in the event of your death. Funeral expenses are also a concern for young singles, but it is typically not advisable to purchase a life insurance policy just for this purpose, unless paying for your funeral would burden your parents or whomever would be responsible for funeral expenses.
Another reason to consider getting life insurance in your 20s is that it’s generally pretty inexpensive for young adults. Buying life insurance when you’re young and healthy can ensure that you benefit from a lower premium. But you should also consider the earnings you could realize by investing the money now instead of spending it on insurance premiums. Farm Bureau’s network of insurance agents and wealth management advisors can help you find the right balance for your needs.
Life Insurance in Your 30s
Now that you’re in your 30s, you may have experienced one or more significant life changes. Whether you’ve gotten married, started a family, landed a new job or bought your first house, you’ll want to be sure your life insurance is keeping up.
If you’ve started a new position or a new career, life insurance may not seem like something that should be at the top of your list. But reconsidering your life insurance when your income changes is one of the smartest insurance moves you can make.
If you’ve had kids, congratulations! You probably know that your life insurance needs increase with children. Ensuring that your family is taken care of is likely very important to you — and to them. Life insurance can cover funeral costs and, more importantly, provide income after you’re gone.
Keep in mind, single-income families are completely dependent on the income of the employed person. If he or she dies without life insurance, the consequences could be disastrous. The death of the stay-at-home spouse would necessitate costly day-care and housekeeping expenses. Both spouses should carry enough life insurance to cover the lost income or the economic value of lost services that would result from their deaths.
Dual-income families need life insurance, too. If one spouse dies, it is unlikely that the surviving spouse will be able to keep up with the household expenses and pay for childcare with the remaining income.
Life Insurance in Your 40s
As your career has advanced, your income has likely increased. You might have even decided to become your own boss and start your own business. It's important to review your life insurance coverage any time you leave an employer.
Keep in mind that when you leave your job, your employer-sponsored group life insurance coverage will usually end, so find out if you will be eligible for group coverage through your new employer, or look into purchasing life insurance coverage on your own. You may also have the option of converting your group coverage to an individual policy. This may cost significantly more but may be wise if you have a pre-existing medical condition that may prevent you from buying life insurance coverage elsewhere.
But not all life changes call for increasing your life insurance. If you’ve paid off debts — car loan, mortgage, private loans — or your children have moved out, your life insurance coverage can likely be adjusted. You may also be able to afford a permanent life insurance policy now. Certain types of life insurance build cash value, which in time can be used as a form of supplemental retirement income.
Life Insurance After 50
As you get closer to retirement, your life insurance needs will change. Now’s a good time to consider a daily living rider. With one in place, you can receive a portion of your policy’s death benefit if you become chronically ill or are unable to perform two of six essential tasks of daily living — eating, toileting, transferring, bathing, dressing and/or continence.¹
On the other hand, if you’re debt-free, no longer working and your children are financially independent, you may be able to reduce your life insurance coverage.
What Life Insurance Policy Do You Need Now?
Your insurance needs will change at different stages in your life. Our life insurance calculator can help you decide how much coverage you need. We offer three types of life insurance: term life, whole life and universal life. Check with your Farm Bureau agent to see which is right for you.
¹Life insurance and its riders can provide some financial protection in your later years, but should not be viewed as a replacement for long-term care or disability income insurance.